An Analysis Of Starbucks' WiFi Claims

from the where's-the-benefit dept

While Starbucks is making noise about just how "successful" their paid WiFi in stores is going, they don't give out any actual numbers. Carlo Longino, over at TheFeature, goes through the announcement, makes some reasonable estimates and explains how much more successful the program would be if they gave away WiFi for free. It's not too hard to do the math and realize that Starbucks isn't getting that much money for each person subscribing to the WiFi service. They are, however, getting a benefit from those users buying high margin coffee-like products from Starbucks. Put those together, and you realize that free WiFi brings in more users who will buy more high margin coffee, and it completely wipes out any rationale for charging for the WiFi. It's not clear why no one at Starbucks or T-Mobile has been able to make this calculation.

Reader Comments

hotspots and coffee

I own a large coffee shop. We provide wiFi free of charge and we have a reputation for having a liquid fast internet. The problem is that people do come in, sit down, bring coffee and lunch from other business's and use our internet for five or six hours a day. At one point I counted 58 customers lurking around the fringes of the shop. Not drinking our product, just sponging internet, table space and power. This added bandwidth on some level slows down the connection for the paying customers. Our solution was to create a web enabled internet system, free to customers with a purchase.

No Subject Given

If it were totally free, then they would run the risk of filling up with dregs that are just there for the free wifi, buying (if even) the cheapest thing on the menu and staying there for hours, having to change after would probably cause a lot of angry outrage, and could do more damage then its worth... starting off with a subscription model, allows them to slowly 'test' the offering with limited adverse side-effects. I do have a few ideas of better models that could be applied, anyone from starbucks hiring? hehe..

Re: No Subject Given

Except that places that have offered free WiFi (like Schlotszky's) haven't seen that happen at all. They've found that the people using free WiFi tend to buy more than the average user, come at off-peak hours, and tend to leave if the place gets crowded. No one has seen the problems you describe.

Re: No Subject Given

it depends on the 'area' I've seen one local coffee shop (granted its near a uni.) get packed out during the normal "busy hours" with wireless device users just there for the wifi, they eventually had to shut that down, and are now looking at some other easy-to-implement ideas.

Prices and the subscription model are the problem

While I don't mind paying, it's the ridiculous subscription models that make Borders and Starbucks system worthless to a lot of people. I sure as heck am not going to be in a Starbucks or a Borders everyday. If it were where you can buy a set amount of time without breaking the bank, then I think it could be successful. Either way, some sort of system would help. Buy this and get more time. Isn't this what McDonald's does?

Starbucks and charging for wifi

I am livid at this charge and have written a letter. This was a lure to get us when they opened and now to change that. I am not going there again if they do not revers.
I urge you all to protest and contact them at their website to let them know.
Our kids in college use them to study. We use them to get out of the house to focus.
At $5 a coffee there had better be something else besides the newspaper to keep us.
Please Please contact Starbucks, Borders and Barnes and Noble about this corporate giant bullying.
Debra